Special Tax Regimes: Types and Benefits
In Russia, alongside the general taxation system (GTS), there are several special tax regimes (STRs) provided under Article 18 of the Tax Code of the Russian Federation. These regimes offer entrepreneurs and organizations a simplified tax payment process, reducing administrative burdens and often lowering tax liabilities. Let’s take a closer look at each of them, their advantages and disadvantages, and criteria for choosing the right one.
What Are Special Tax Regimes and Why Are They Needed?
Special tax regimes are alternative taxation systems offering benefits and simplifications compared to the GTS. They allow payment of one or more simplified taxes instead of the full set of taxes required under the general system, freeing entrepreneurs from the need for complex accounting and allowing to focus more on business development. The main goal of STRs is to stimulate economic activity, particularly in small and medium-sized businesses and specific sectors of the economy. They help lower the entry barrier for new entrepreneurs and reduce the financial burden on existing businesses.
Types of Special Tax Regimes:
The Tax Code of the Russian Federation defines several STRs, each with unique features suited to specific taxpayer categories:
1. Simplified Tax System (STS):
The most common mode. Entrepreneurs and organizations on the STS pay a single tax—either 6% of revenue or 15% of profit (revenue minus expenses). When selecting the tax base, entrepreneurs must carefully consider their expenses and revenues. The STS has revenue and employee limitations. For example, in 2024, the maximum revenue for STS eligibility is 240 million rubles, and the maximum number of employees is 150.
2. Patent Tax System (PTS):
Suitable for individual entrepreneurs engaged in specific activities (as determined by regional authorities). The tax is paid as a fixed amount—a patent—based on the type of activity and region. PTS offers simplicity in accounting but has strict limitations on types of activity and number of employees (usually only the founder).
3. Tax on Professional Income (TPI) – Self-Employment:
A special mode for individuals who provide services or sell goods to individuals. The tax is 4% on revenue from transactions with individuals and 6% from transactions with legal entities. TPI is ideal for freelancers, independent craftsmen, and other solo entrepreneurs with low turnover. It automatically generates reports, simplifying tax payments.
4. Unified Agricultural Tax (UAT):
Applies to agricultural producers engaged in agricultural production. The tax is calculated as 6% of revenue, considering the specific aspects of agricultural production. UAT has specific criteria that determine eligibility.
5. Automated Simplified Tax System (ASTS):
A relatively new mode based on the automated tax reporting and payment. It uses special software to automatically calculate tax and send payments to the tax authorities. ASTS is available for small businesses and entrepreneurs, with revenue limits similar to STS.
6. Production Sharing Agreement (PSA):
A specific mode used in the oil, gas, and mining industries. It regulates taxation for projects involving foreign investors and defines the distribution of revenue between the state and the investor. PSA has a very narrow application and complex structure.
Comparative Analysis of STRs:
STS (6% on revenue or 15% on profit)
1 – Simplicity in accounting, low tax rate
2 – Revenue and employee limits
3 – Criteria: revenue, employee count
PTS (Fixed Patent Payment)
1 – Simplicity, predictable tax payments
2 – Activity type restrictions
3 – Criteria: type of activity, employee count
TPI (4%/6% on revenue)
1 – Simplicity, automated accounting
2 – Restrictions on activity types, limited to individuals and legal entities
3 – Criteria: type of activity, client base
UAT (6% on revenue)
1 – Simplified accounting for agricultural producers
2 – Specific criteria for application
3 – Criteria: type of activity, agricultural production criteria
ASTS (Automated Accounting and Payments)
1 – Simplicity, automation
2 – Revenue and employee limits
3 – Criteria: revenue, employee count
PSA (Specific for Extractive Industries)
1 – Attracts foreign investments
2 – Complex structure, narrow application scope
3 – Criteria: type of activity, agreement conditions
Choosing the Optimal Special Tax Regime:
Selecting an STR is a crucial decision that requires analyzing the business type, revenue, employee count, and other factors. Incorrect choice can lead to additional financial costs and issues with the tax authorities. It is recommended to consult a qualified specialist such as an accountant or tax advisor to identify the most suitable mode for your business. Consider both the current situation and future growth prospects to avoid needing to switch regimes later. Ongoing changes in tax legislation also require up-to-date and competent consultation.
